Evidence of meeting #50 for Finance in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was wine.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

4:15 p.m.

Rowland Dunning Executive Director, Canadian Association of Liquor Jurisdictions

Thank you, Mr. Chair.

Good afternoon. I'm Rowland Dunning, executive director of the Canadian Association of Liquor Jurisdictions, or CALJ for short. CALJ represents provincial liquor authorities in all ten provinces and the three territories. Thank you for the opportunity to speak today.

CALJ's members believe that Canadians deserve easy and comprehensive access to the fine wines produced across this country. How much access do consumers have, you might ask?

Well, they have a broad choice of Canadian wines in their province's or territory's retail stores, amounting to $1 billion in sales just last year, and they can order any Canadian wine any time through private or special ordering services, which we have outlined in our submission.

Provinces are ensuring these programs become even better and faster. They can take wine home with them on their person and for their personal use when they visit wineries in other provinces. In short, Canadian consumers already have good access to Canadian wine, and that's why we think the proposed amendment is unnecessary. In fact, the only reason Bill C-311 exists, and the only reason we're all here today, is that some wineries feel they shouldn't have to pay provincial markups on these sales.

We would be happy to elaborate on these liquor board supports for Canadian wine and on the private order systems that allow consumers to order any wine from any Canadian winery through their home province's liquor retailer.

Every province and territory does apply a markup or a commodity tax to the sale of alcohol to raise revenue and to help pay for government services such as health care, education, and other important priorities.

Yes, a portion of our markup revenue covers the cost of retailing, but most of it goes to provincial spending priorities as well as to helping offset the social, health care, and law enforcement costs that arise when alcohol is not used responsibly.

We're all for tourists visiting wineries in other provinces and taking wine home with them. However, we do have concerns with direct sales into other provinces, since this is a new and distinct retail channel. The impact on our businesses and provincial revenues from allowing direct sales could be substantial. In some U.S. states and the U.K., direct sales account for 4% to 5% of total wine sales. This is the equivalent of about $300 million in annual wine sales in Canada.

Proponents of the bill say the liquor boards could still collect a portion of their markups by adopting a permit system like that used in some U.S. states. These are cumbersome systems whereby out-of-state wineries and even consumers have to register with tax authorities and purchase permits. Our existing private ordering services are much simpler. Why would anyone want to change from the simple and convenient Canadian service to the bureaucratic American system unless they wanted to avoid legitimate provincial charges on wine sales?

Here's something else to seriously consider. Beyond being unnecessary, we think the bill may actually pose a threat to the overall well-being of the Canadian wine industry. Canada's international trade agreements require equal treatment of imported and domestic wines. CALJ's members are frequently reminded of this obligation by federal trade officials, and Canada's trading partners pay close attention to liquor boards, particularly the sale of wine.

I'm sure you all know that wine has been a focus of discussions between Canada and the EU during the current CETA negotiations. In fact, it is our understanding that the EU have asked DFAIT about this bill and its international implications and have not received a response. CALJ's members do a lot to support Canadian wine, supports our international trading partners readily assert are not entirely consistent with our trade obligations.

In the eighties, Canada lost a trade challenge about wine, and the focus of that challenge was differential markups between domestic and imported products. Proponents of Bill C-311 suggest it is consistent with our international trade obligations, as it allows for the direct sale of Canadian and imported wines; however, foreign wines would have to be sold by Canadian retailers and would be subject to provincial or territorial markups, while Canadian wines sold directly by wineries would not.

We're right back at the problem that caused the trade challenge in the eighties regarding differential markups. We believe this would be so large a concern that Canada would immediately face complaints from its trading partners. Even if direct sales from Canadian wineries paid full markups, it appears to us that foreign wineries would have to be allowed to make direct consumer sales as well.

In any trade dispute, Canada would face complaints not only about the new provisions allowed by the bill but also about all of the measures that support Canadian wine. In such a dispute, Canada and Canadian wine have much to lose.

In summary, and on three key messages that I would like to bring to this committee's attention, CALJ believes Bill C-311 is both unnecessary and potentially harmful to the Canadian wine industry.

First, it could create an unfair system whereby some wineries would pay provincial charges and others would not. Second, it could significantly undermine provincial revenues. Third, it could result in trade complaints that would significantly damage the domestic wine industry.

Thank you for allowing us the opportunity to present our views on this matter.

4:20 p.m.

Conservative

The Chair James Rajotte

Thank you very much, Mr. Dunning.

We'll now hear from the Canadian Vintners Association.

4:20 p.m.

Dan Paszkowski President and Chief Executive Officer, Canadian Vintners Association

Thank you, Mr. Chair.

My name is Dan Paszkowski, and I'm the president of the Canadian Vintners Association. On behalf of CVA members, I am grateful for the invitation to appear here today. I'm pleased to discuss Bill C-311, a proposed amendment to the Importation of Intoxicating Liquors Act .

CVA membership represents roughly 90% of all wine produced in Canada. We strongly support Bill C-311 and are encouraged by the support that direct-to-consumer wine delivery has received from consumers across Canada and from all parties in the House of Commons.

Canada has more than 400 grape-based wineries and 1,000 grape growers producing in six provinces. We have 196 grape wineries in British Columbia, 125 in Ontario, 70 in Quebec, and 22 across the Maritimes. The majority of Canada's wineries are small-volume, premium-focused operations that have significant capital invested in their vineyards, wineries, sellers, retail operations, tasting rooms, and increasingly in cellar door restaurants.

We are a young and growing industry. Each vintage, more wineries are opening and more wines are available for sale. While growth is positive, we are challenged by our limited sales channels and the physical brick-and-mortar limitations of provincial liquor board retail stores. In 2011, VQA 100%-Canadian wine sales represent a mere 6% share of the wine market nationally.

Consumer demand for our wines is thriving, and consumers expect to be able to purchase the wines they want in the manner of their choosing: from retailers, at the winery, and remotely by telephone or online.

In our support for direct-to-consumer wine delivery, we have engaged in discussions with consumers and wineries across Canada; with legal and trade experts; with federal and provincial regulators, liquor boards, and elected officials; and with NGOs focused on alcohol in moderation.

In response, we are recommending two minor amendments to the bill that we believe will enhance its clarity, satisfy consumer demand for choice in wines and how they are delivered, satisfy regulatory requirements, and create a new source of government tax revenues. In the interests of time, the amendments we are recommending are included in our written submission.

To comply with our international trade commitments, Bill C-311 must meet national treatment obligations. As such, imported wines must be afforded the best treatment provided domestic wines, but only once they have landed in Canada. Bill C-311 meets this obligation, but to be clear, it does not permit foreign wineries to ship directly to Canadian consumers.

Bill C-311 essentially legalizes the following: out-of-province tourists can buy wine at a winery and transport it home either on their person or by having it delivered; out-of-province consumers can order wine online directly from an out-of-province winery and have it delivered. This would permit Canadians to bring back or have delivered wine that was purchased outside of the consumer's home province. As is normally the case, these purchases would be taxed in the province in which the transaction takes place.

While there is limited concern with tourists bringing wine back home with them after an out-of-province trip, provincial governments and liquor boards have expressed concern about the prospect of Bill C-311 extending direct delivery to out-of-province winery wine clubs, online purchases, or liquor board retail stores.

Interprovincial wine shipments from a winery to an adult consumer would require the winery to collect all taxes, levies, and fees on behalf of the province in which the consumer places the order. It It is important to note that in November 2011 the chair of the New York State Liquor Authority testified that direct-to-consumer wine shipping has generated higher local and state sales tax revenues, providing benefits to the state, consumers, and local wineries.

The Province of Ontario, as do most wine-producing provinces, allows its wineries to sell directly to in-province consumers. This has not led to a displacement of wine sales through the Liquor Control Board of Ontario, whose share of retail sales increased from 83% in 2006 to 84% in 2010.

It has been argued that Bill C-311 will stimulate arbitrage opportunities based on varying provincial tax structures across Canada. Differences in tax rates and wine prices are nothing new in Canada, and Bill C-311 will not eliminate provincial authority addressing these concerns.

Finally, the intent of Bill C-311 aligns perfectly with regional efforts to break down trade barriers between provinces. The Trade, Investment and Labour Mobility Agreement between British Columbia, Alberta, and Saskatchewan, the Quebec-Ontario Trade and Cooperation Agreement, and the Partnership Agreement on Regulation and the Economy between New Brunswick and Nova Scotia are examples of efforts by Canadian provinces to seek new partnerships, expand trade opportunities, and collaborate on issues of mutual importance.

In closing, with a few minor amendments Bill C-311 will provide Canadian wineries with a new sales channel that will create a stronger internal market for Canadian wine, a solid base for the industry to sustain its growth ambitions, new opportunities for wine country tourism, new jobs, and enhanced government revenues.

Thank you.

4:25 p.m.

Conservative

The Chair James Rajotte

Thank you very much, Mr. Paszkowski.

We'll hear from Mr. McWatters, please.

4:25 p.m.

Harry McWatters Time Estate Winery, Vintage Consulting Group Inc.

Thank you.

I'm Harry McWatters and I'm the president of the Vintage Consulting Group. I've earned my living in the wine business for almost 45 years as a producer, grower, and consultant, and I was the founding chairman of VQA Canada.

Some of the things I'd like to address here have already been touched on, but the first thing is that this bill—and I commend Dan Albas for bringing this bill before the House—brings clarity to what can and cannot be done from a federal perspective, and hopefully, then, the provinces will follow suit to create clarity for the producers who will take advantage of this in the future.

Today I can speak most authoritatively for British Columbia, where we have approximately 200 producers, most of which are very small family operations. Some actually advertise that they will ship across the country, while others clearly state they won't do it because it's a federal offence, and even though people have not been prosecuted, they're not of a mind to break that law.

One of the things that is unique to this is that the small producers often do not have sufficient quantities to be able to appoint an agent or a distributor in other jurisdictions; therefore, even if they were to apply for the listing, they really don't have the inventory to support a meaningful listing in other jurisdictions. This would give them the opportunity to ship those unique products to other regions—and I'm not specifically talking about British Columbia—that have tried unsuccessfully to source wines from other wine-producing regions in Canada.

As a winery consultant, I have one client in California who, if it weren't for this kind of business, wouldn't be in business. He's a third-generation producer, producing a unique style of dessert wine. People aren't interested in buying case lots or multiple case lots in other jurisdictions, but his business survives from his cellar-door sales and the one or two bottles that are shipped as a result of mail-order business. I see this as a great opportunity for our small producers from coast to coast.

I should also add that I do have clients from Vancouver Island to Nova Scotia to Mexico, so I am involved in consulting in a number of jurisdictions.

One other aspect that I think is important, and it was alluded to, is the advantage the large producers may have of shipping non-100% Canadian wines. I can speak authoritatively for the three large producers in British Columbia, and all three, with their multiple outlets, sell only VQA wines from their wine shops, thus allowing for the purchase by their visitors of 100% British Columbian or Canadian-grown product from those particular outlets.

I think this bill is long overdue—80 some-odd years overdue—and I think it's a wonderful opportunity for us, if by no other means, to unite this country from coast to coast through wine.

4:25 p.m.

Conservative

The Chair James Rajotte

Thank you, Mr. McWatters.

We'll hear now from Ms. Ruddock, please.

March 27th, 2012 / 4:25 p.m.

Janice Ruddock Managing Director, Winery Association of Nova Scotia

Hello. My name is Janice Ruddock and I am the managing director of the Winery Association of Nova Scotia.

I want to thank the Standing Committee on Finance for the opportunity to attend this committee hearing in reference to Bill C-311, the bill to amend the Importation of Intoxicating Liquors Act.

Please allow me just a few minutes to introduce the wine industry in Nova Scotia. We have a 2020 vision: that in 2020 we will have 20 wineries and over 1,000 acres of grapes planted.

Currently there are 14 wineries, but I'm going to tell you that they have enough enthusiasm for 140 wineries. There are enormous dreams and plans in the Nova Scotia wine industry, and the core part of my job is finding the support to help these dreams come to life by promoting Nova Scotia wines wherever possible. Nova Scotians have one of the lowest per capita consumptions of wine in Canada, so obviously the opportunity to move into other regions of Canada is a very attractive possibility for the growth of the Nova Scotia wine industry.

The majority of our wineries are located in the scenic Annapolis Valley, which is one hour from Halifax and a tourist destination.

With a population of only 945,000—I'm not sure where Hanspeter got the other 55,000—who historically are not wine drinkers, we have to spend a considerable amount of resources just on educating people about wine—not Nova Scotia wine, but wine in general.

Our Nova Scotia signature grape is L'Acadie Blanc, and most wineries in Nova Scotia will produce a L'Acadie Blanc wine, which is the most wonderful accompaniment to our delicious seafood. If you want to, as Scott has mentioned, you will see that this evening. Nova Scotia is being recognized for its high-quality sparkling wines, plus our off-dry whites. We also make red wines and icewines as well.

With current 100% Nova Scotia wine not even filling the shelves of the 105 Nova Scotia Liquor Corporation stores, today our key priorities remain simply to increase the production of 100% Nova Scotia wines and to educate the consumers on Nova Scotia wines. We like to say, “Created under the same earth, sea, and sky, the wines and seafood of Nova Scotia are, quite simply, a match made in Nova Scotia heaven”. That is why our symbol is a wineglass and a lobster claw. This symbol is put on our wine that is produced with only 100% Nova Scotia grapes.

Nova Scotia has great wines. We've been recognized with international accolades. For example, Prestige Brut, from L'Acadie Vineyards, was the only entry from North America to win a medal in the ninth international competition for the world's best sparkling wines.

Nova Scotia wines are very hard to duplicate. They add diversity and uniqueness to the Canadian wine industry, and aren't diversity and uniqueness what Canada is all about?

Therefore, the ability to ship our unique wines across Canada will give Canadian consumers an opportunity to sample truly unique and truly Nova Scotian wines. This year, we are formally launching a Nova Scotia signature wine called Tidal Bay, which again is unique to Nova Scotia. Only 14 months ago, Nova Scotia saw our own wine regulations come into effect. We have been asked whether it's VQA Nova Scotia; it is not, at this point in time, but we certainly are investigating the opportunity.

More to the point on Bill C-311, as you can appreciate, as a growing wine industry in a province of 945,000, the Nova Scotia wine industry is always interested in developing new channels of distribution for our products. Therefore, the Nova Scotia wine industry would support the opportunity for individuals to order or transport Nova Scotia wines across Canadian provincial boundaries.

We have only one request, though—and keep in mind that I am here on behalf of the Nova Scotia wine industry—which is that Bill C-311 reflect or be adapted to incorporate “100% Canadian” in front of the word “wine”. The fledgling 100% Canadian wine industry lacks the awareness that imported wines to Canada have among wine drinkers. Imported wines to Canada increased by 8.8% for the 10-year period from 1996 to 2006. We are concerned that without the definition of “100% Canadian” in front of the word “wine” in Bill C-311, there will be an opportunity for wines of all countries to be moved across provincial borders.

Nova Scotians, being price-sensitive shoppers, will have the opportunity to order imported wines that are under a different business model from our Canadian wines, and there is also a high awareness of the country of origin among our fledgling wine drinkers. No doubt Nova Scotia wine consumers would be thrilled with this opportunity.

4:30 p.m.

Conservative

The Chair James Rajotte

Ms. Ruddock, could you conclude? You are over time.

4:30 p.m.

Managing Director, Winery Association of Nova Scotia

Janice Ruddock

I'll be really quick.

I want the committee to remember what my job is today. It's to speak on behalf of the Nova Scotia wine industry; it is not to discuss free trade agreements or the ramifications of using protected language in our bills. That's the key point. I know we're not able to put “100% Canadian” on it, but that is what we request.

To summarize, Bill C-311 is a step towards having more Canadians enjoy more Canadian wine if the spirit and the wording of the bill is to support the Canadian wine industry. We, as the Nova Scotia wine industry, are trusting it is.

Thank you for the opportunity, and I apologize; I just get so passionate about our Nova Scotia wines.

4:35 p.m.

Conservative

The Chair James Rajotte

Thank you very much for your presentation, and for your passion.

We will start members' questions with Mr. Julian, please.

4:35 p.m.

NDP

Peter Julian Burnaby—New Westminster, BC

I don't know about you, Mr. Chair, but all this talk of fine quality Canadian wines is making me mighty thirsty.

It's a good thing you don't have samples of your product here today.

I'll be splitting my time with Mr. Chisholm. I thank all the witnesses for coming here today.

I'd like to direct two questions to Ms. Martinez, Mr. Dunning, and Mr. Paszkowski. The first is on the issue of sales that are already occurring.

Mr. Dunning, you mentioned that currently Canadians can ship directly to their homes through their provincial liquor boards. Could you give us a sense of the extent to which that's happening now? What percentage of overall sales are involved?

The second question is around the issue of trade that's been flagged in a number of presentations. In the United States, they're bound by the same trade agreements that we've signed. We have 39 or 40 American states that now have similar legislation in place. When the same thing is happening in the United States, to your knowledge, has that triggered any sorts of trade challenges?

4:35 p.m.

Executive Director, Canadian Association of Liquor Jurisdictions

Rowland Dunning

I can give you an example from Ontario on how the private ordering system works. They have a program they're rolling out in all of their stores for customers and consumers to order through the private ordering program. Last year alone, I know they had 240 private orders totalling 8,300 cases, and I believe the value of that was something close to $300 million or more.

4:35 p.m.

NDP

Peter Julian Burnaby—New Westminster, BC

What percentage of sales overall would that be in Ontario?

4:35 p.m.

Executive Director, Canadian Association of Liquor Jurisdictions

Rowland Dunning

I don't have a direct answer to that, but I do have someone in the room from Ontario who might have those specific numbers.

4:35 p.m.

NDP

Peter Julian Burnaby—New Westminster, BC

Perhaps you could give it to committee later on, if you have a chance.